Rep. Frank Hornstein, DFL-Minneapolis, said the DFL caucus wants to take a “balanced approach” with additional transportation spending, with equal weight given to highway repairs in greater Minnesota and transit in the Twin Cities area. This Jan 21 photo shows the construction of an enclosed stairway and elevator connecting the Green Line’s Central Station light rail platform to a skyway in downtown St. Paul. (File photo: Bill Klotz)

Tax cuts, development top House budget list

House leaders have consistently sought to dictate a quicker pace and a more expansive agenda for this legislative session. That trend continued on Friday when the House DFL caucus released its budget targets, sketching out a plan that would devote the vast majority of the projected $1.2 billion surplus to tax cuts aimed at businesses and middle-class incomes and a number of new spending projects across several budget sectors.

About $550 million would be dedicated to tax relief. That figure contains about $500 million worth of tax repeals and federal income tax conformity that have already passed the House, augmented by a new set of property tax credits and refunds totaling around $50 million.

On the spending side, Democrats want to double back to reinvest in a number of areas that received significant boosts during the 2013 session. The overall target includes $172 million for “economic development,” $90 million-plus for education and $50 million for transportation.

The priorities revealed by the House demonstrate considerable differences from Gov. Mark Dayton, whose supplemental budget package would give back even more in tax breaks while spending less on new projects.

Among the three major negotiating bodies, the Senate continues to play its cards closest to the vest, with an initial version of the Senate tax bill set to be released on Wednesday.

In announcing the proposal, House Majority Leader Erin Murphy said the House plan would “put more money in the pockets of middle class Minnesotans, build on our historic investments in education, and support Minnesota workers and small businesses with job creation initiatives.”

House does not add to reserve

Dayton’s budget seeks to add $455 million to the state’s budget reserve, while spending $162 million on new outlays. (A substantial portion of the governor’s proposed spending — about $64 million — would be devoted to a 4 percent pay increase for disability service providers. The House proposes to spend about $75 million to boost provider pay and to augment nutrition and care programs for seniors.)

The House plan leaves only $194 million of the estimated surplus unaccounted for — which, notably, would not be earmarked for the state’s reserve account — and has more than twice as much in spending. The House targets released on Friday would see a total of $389 million in new spending, $172 million of which is geared toward economic development projects.

Within that category, $125 million would be earmarked for an inclusion in a capital investment bill. Should that figure stand, the House’s $850 million bonding bill amount could wind up much closer to the nearly $1 billion package sought by Dayton.

Rep. Paul Marquart, DFL-Dilworth, offered more detail into the House DFL’s thinking with a Tuesday afternoon press conference. Flanked by about a dozen rural and outstate legislators, many of them representing swing districts, Marquart brought attention to facets of the House’s new budget targets that would benefit the state’s smaller towns.

While the House has already sent a $503 million tax-cut bill to the Senate, their budget package allots about $50 million more for property tax breaks that are expected to emerge from the House Property and Local Tax Division report this week. Among the ideas pegged for inclusion in the larger bill are an expansion of the Homestead Credit for farmland, which would come at a cost of $15 million, and one-time boosts to the tax credit available to homeowners and renters, at a cost of more than $12 million.

The most expensive single proposal discussed during Tuesday’s press conference is a wide-ranging effort to expand broadband access for rural areas across the state. Companion bills carried by Rep. Erik Simonson, DFL-Duluth, and Sen. Matt Schmit, DFL-Red Wing, would devote $100 million to that goal. During Tuesday’s press conference, Simonson pointed out that this amount was identical to the suggestion that emerged from Dayton’s own task force to address the topic.

Dayton, for his part, left broadband out of his budget plan altogether, saying he had yet to see a coherent plan from stakeholders. Simonson said he plans to stick with the figure.

“What the number ends up being, I don’t know,” Simonson said. “I’m advocating and will continue to advocate for the $100 million that I started with.”

Education would get added $92M

The House budget targets propose to spend an additional $92 million on education. About $3.5 million of that total has already been spent to make up the recently discovered gap in school lunch funding, which saw some low-income students denied hot lunch due to insufficient funds.

The remainder would be divided among other education priorities. Some amount would go toward funding teacher evaluations, a policy scheduled to go into effect this fall that has often been called an “unfunded mandate” by education funding advocates. Marquart said he disagrees with an $80 million estimate of implementation costs, which he said is “too high.”

The targets would also seek to fund an expansion of early childhood education scholarships. One proposal, carried by Rep. Ryan Winkler, DFL-Golden Valley, who led the push on early childhood education last session, would spend about $20 million annually on new scholarships, with scheduled increases factored in for each subsequent year.

Marquart said he is not ready to commit to a firm number on either topic, adding that the omnibus education finance bill would be finalized during the coming week.

$50M proposed for transportation

The House package also includes $50 million aimed at transportation funding projects, with upkeep on roads and bridges and enhanced railroad safety fingered as necessary targets. Rep. Frank Hornstein, DFL-Minneapolis, said the caucus wants to take a “balanced approach,” with equal weight given to highway repairs in greater Minnesota and transit spending in the Twin Cities area.

Hornstein and Sen. Scott Dibble, DFL-Minneapolis, are still planning to push a larger transportation funding proposal this session, and the House author said that package would get its first hearing in his House Transportation Finance Committee on Wednesday night. Typically, Hornstein observed, transportation expenses come out of dedicated revenue streams such as gasoline taxes or user fees; the $50 million set aside in the House budget would be a departure from that practice.

“Any additional resources are welcome,” Hornstein said, “but the use of general fund dollars is not traditionally the way we have funded transportation.”

With a bonding bill also expected to include some transportation funding, Hornstein said he was not concerned that the combined general fund and capital investment money would discourage the passage of a comprehensive funding plan.

“We’re going to be moving both of these bills,” Hornstein said, referring to the general fund allocation and the transportation revenue proposal. “Ultimately, the political process will determine what advances.”